Economic package is welcome, more needs to be done

At last the Finance Minister has come with a package
which could bring relief to millions of Indians who are at the lowest strata of
the society. The announcement of Rs.1.7 lakh crores appears big but looking at
the enormity of the challenge majority of countrymen face there is a doubt
whether this is enough.

The principle
idea behind the measures is that no Indian should go hungry during this period
of complete lockdown of three weeks. This is notwithstanding the fact that
millions of poor go to bed with hungry stomachs in India even in normal times.

In order to
alleviate hunger and deprivation, included in the package is free supply of
additional 5 kg of rice/wheat and one kg dal per person in the next three
months. This according to the government will benefit 80 crores people through
country wide PDS. This is a good move as there are huge stocks of food grains
with the government- nearly 585 lakh tons of
wheat and rice against the mandated buffer stock of 241 lakh tons.

The carrying
costs of these stocks itself is quite high. If it can be delivered to feed the
poor it would indeed be a commendable job. Much depends on implementation; PDS
has not exactly covered itself with glory in the past. Given the logistics
challenges at present, it has task cut out for itself.

In a significant
measure, all women Jan Dhan account holders will get Rs 500 per month for next
three months. This will cost Rs 30,600 crores for 20.8 crore women with Jan
Dhan accounts. Since the informal sector is all but collapsed this is a better
method of quickly putting money in the hands of women. Two quick points may be
made. One, the amount could have been higher considering cost of living and
extraordinary circumstances that prevail now. Second, in a more inclusive move,
all Jan Dhan accounts, a little over 38 crores could have been given the
benefit. The otherwise positive discrimination may not actually be beneficial
to the poor now. Under MGNREGS,
adult member of every household gets 100 days of work if one is prepared to
undertake unskilled manual work. Per day wage is currently Rs 182 which has
been hiked by Rs 20. So, this will generate additional Rs 2,000 income per
year. However, under this social security scheme, on an average only 47.2 days
work/wage was given in 2019-20.

In poorer states,
the number of days will be lesser than the average. Even now the government can
mandate higher number of working days that can be allocated to a household.

Package includes
payment of EPF by the government for the next three months. It is applicable to
firms that employ less than 100 employees and draw a salary of less than Rs
15,000. Perhaps the objective is to incentivize retention of workers by small
firms. But a better method would have been to ensure adequate working capital
at competitive rates.

There is already
an ongoing PM Kisan Yojana whereby farmers owning land will get Rs 6,000 every
year, Rs 2,000 installment will be released immediately and credited to
beneficiary accounts. Here again the government could have released two-three
installments that would have helped farmers to tide over the current crisis.
Issues of logistics during lockdown will mean huge losses to farmers. Post
lockdown too the price scenario is not bright for farmers due to bumper crop,
large grain holdings with FCI and possible recession globally.

Though the Finance Minister took some time,
the package is comprehensively devised. Total 800 million beneficiaries are
identified upfront. Probably for the first time, government has gone beyond
‘below the poverty line’ bench mark to include a very large section of the
poor. The RBI too has come out with its set of monetary measures to fight the
virus hit economy. Had both RBI and the Finance Minister combined and announced
fiscal and monetary measures together, it would have probably created a big
bang effect. But given the constraints at this point of time and the enormity
of the situation, substance is what matters more than the timing or the
strategy.

At the time of
writing, official line is that there is no community transmission. This is
notwithstanding the fact that numbers of those tested positive have gone up
significantly in the last week.

Besides following
all the instructions, there is little one can do except pray and hope that the
virus spread does not replicate EU. The USA has announced a US $ 2 trillion
package, the largest in history. Perhaps, we may take a cue or two from it to
make our package bigger. More importantly, it has laid out a detailed plan for
helping out SME’s. Our small businesses deserve a better deal; they are also passing
through a worst phase which is not their making.

The author has four decades of experience in higher
education teaching and research. He is the former first vice chancellor of ISBM
University, Chhattisgarh.